Summary
The claimants argued that a carrier's exemption clause in the bills of lading
was so wide as to be repugnant to the purpose of the contract. But the judge
agreed with the carriers that the clause was valid. It was not inconsistent with
the purpose of a commercial contract for certain risks to be allocated,
particularly as the bearer of the risks would normally be expected to insure
against them.

DMC Category Rating: Confirmed

This case note is based on an Article in the January 2005
Edition of the ‘Bulletin’, published by the Marine and Insurance teams at
the international firm of lawyers, DLA Piper Rudnick Gray
Cary, which is an International Contributor to this website.

Background

The action concerned the shipment of 155,895 cartons of frozen chicken parts
from Brazil to Japan between October 2001 and January 2002. The goods were said
to have been in good order and condition when shipped. Mitsubishi, the holder of
the bills of lading, however, alleged that 109,344 cartons were delivered in a
damaged state because the vessel's refrigeration systems were not working and/or
the vessel was unseaworthy and/or uncargoworthy.

The carriers,

Eastwind,
relied on an extensive carrier's exemption clause in the bills of lading. This
provided that the carrier would not be responsible for loss of or damage to or
in connection with goods shipped of any kind whatsoever, however caused "whether
by unseaworthiness or unfitness of the vessel… or by faults, errors or
negligence, or otherwise as howsoever" and, in particular, arising from
or relating to a large number of specific causes including (again)
unseaworthiness and from "any other cause whatsoever, whether or not of
a like kind to those above-mentioned, and including negligence on the part of
the Carrier, his servants, agents or others".

Mitsubishi argued that this clause was so wide as to be
repugnant to the whole purpose of the contract and should be rejected in its
entirety. It effectively meant that the carriers had no liability at all for any
breaches of contract and reduced the contract of carriage to a mere declaration
of intent. The clause had to be construed against the party who produced it and
sought to rely on it.

The carriers

, however,
said that the clause had to be construed on a case-by-case basis. In commercial
matters, where risks are normally borne by insurers, the parties should be free
to apportion risks as they thought fit.

Judgment
The judge agreed with the carriers. This was not a consumer contract to
which the Unfair Contract Terms Act 1977 or the Unfair Terms and Consumer
Contracts Regulations 1999 applied. If giving the words their literal meaning
would be at odds with the main object of a contract then, under the common law,
the court could apply a more restricted meaning consistent with that object (Glynn
vMargetson & Co [1893] AC 351).

In the judge's view, it was plain that the words used did not
operate to relieve the carrier of all liability for any and every breach of
contract. The clause would not, for example, cover loss or damage caused by
dishonesty or by the carrier arbitrarily refusing to ship the goods to the port
of discharge. It was true that the clause shifted most risks which might result
in loss of or damage to goods to the holder of the bill of lading. But this was
not inconsistent with the purpose of a commercial contract of carriage where the
bearer of the risk could insure against it. The fact that the application of the
clause had to be determined on a case-by-case basis did not make its meaning
uncertain. Nor did the principle of construing a contractual provision against
the person who produced and sought to rely on it extend to applying the widest
possible meaning so as to render the clause repugnant to the object of the
contract as a whole.

The clause was, therefore, a valid exemption and operated to
protect the carriers where goods were damaged because of their negligence or
because of the unseaworthiness or uncargoworthiness of the vessel.

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